I think that you're doing the right thing by staying out of it - she's already quit her job, so warning her that she's doing something monumentally unwise is a bit late, and won't have any effect anyways, given that she's already ignored the sensible advice.
But I do agree that she's making a mistake, and she'll have to learn the hard way. She may well gain important personal growth and life experience from the process, but yeah, she's doing it the hard way. But it's their life to live, and if they're willing to take the risk of ending up homeless because they can't pay the rent, then that's a decision she and her boyfriend have to make. They don't have kids, so they aren't harming any innocent people along the way.
Running a business and making a living at it is a really hard, really risky proposition, even for people who have a realistic outlook, good business skills, and the requisite two years of savings to cover them until they can hope to make a profit. Quitting your job to make a living at a home business when you have no savings, already have trouble making the bills, and have no real business plan, in an business that is highly oversaturated, and where even the most successful and talented people can't make a living at it... That's like quitting your job to write a book so you can become a bestselling author like JK Rowling and make loads of money.
As an aside, I did a quick calculation. if she can make $5 profit per item, after she pays for materials, packaging, shipping, advertising, and the cost of a booth or an online store, she will need to make and sell 50 pieces per week, every week, to hit the US poverty line for a single person. She could pad her earnings by casual work, but that will mean she has less time to make jewelry, which puts her back in the position of making her living at another job and doing jewelry on the side, only with a worse salary and less job security.